It won’t be long before the application of environmental, social and governance criteria to assets is no longer seen as a particular sector within investing, but ubiquitous for all investors, financial executives said at the meeting. annual meeting of SIFMA.
This year’s conference, which brought together leading figures from the banking, asset management and advisory sectors, was held the same week as the COP26 Global Climate Summit, in which some 450 financial companies around the world have committed to achieving net zero carbon emissions targets by 2050, and a global standards body for ESG labeling has been established.
The push towards unified standards for green investing was the basis of much of the discussion at the event, especially among those working in the field of asset and investment management. .
Marty Flanagan, President and CEO of Invesco, said in a few years “we’re not going to talk about ESG as a separate part of investing”.
“It’s not a marketing gimmick, it’s something that is fundamental to investing and I think that’s really where things go very, very quickly,” said Flanagan.
As financial firms embrace change widely, the rapid pace at which it is accelerating has become increasingly client-focused, said Suni Harford, chairman of UBS Asset Management and sponsor of the UBS Group Board of Directors for sustainability and impact.
Harford said a recent UBS survey of high net worth clients found that two-thirds of respondents see sustainability as very important to their portfolio performance, and 78% believe that sustainable investments will maximize their returns.
“So it’s not just about aligning their values with their investments anymore,” said Harford.
“Rational investors who seek above all to increase their returns believe more and more that sustainability offers more advantages than conventional investing. “
This underscores the important role that asset and investment managers play in educating their clients on these issues, Harford said. She said the main responsibility of companies in this area is “to educate and help our clients manage sustainability risks in their portfolios”, rather than telling them what their portfolio goals should be.
“Our job is to provide them with the choice they seek to affect the changes they wish to see,” said Harford.
United States Assistant Secretary of the Treasury Wally Adeyemo told the conference that the financial industry‘s efforts to raise capital for sustainability efforts are a critical part of tackling the existential threat of climate change. The Glasgow Financial Alliance for Net Zero’s commitment, with companies with some $ 130 trillion in assets, to achieve net carbon emissions in their portfolios by 2050 marks a breakthrough on this front, but more than transparency is needed to ensure that these efforts are effective, Adeymo said.
“Fundamentally, the truth here is that for us to move from making commitments to actually getting things done, these goals will need to be credible and transparent to foster accountability,” Adeymo said.
Regulators’ efforts to establish clear and unified labeling standards will also help the space mature, said Flanagan, noting that the stigma associated with “greenwashing” portfolios is damaging the industry as a whole.
“[Greenwashing is] not good for the industry and I think it’s a good thing that regulators are dealing with it, because it’s causing a problem for everyone, ”Flanagan said.
Harford warned, however, that the need for funds that fall short of sustainability criteria will always exist and that the rapidly growing regulatory framework surrounding sustainable investing should remain flexible enough to adapt to the changing space.
“We certainly need regulation, but it needs to be flexible enough to keep up with the pace of change, and we need to be very careful not to be too specific about what is and what is not sustainable today, otherwise we could stifle much needed innovation tomorrow. “said Harford.